Frontrunner - 26th May 2023

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WHEAT

• Markets continue to fall

World wheat markets continued to fall this week, following Russia's agreement to extend the Black Sea export corridor deal until the 17^th July. Prospects of a continued flow of Ukrainian wheat have kept speculative sellers active. Encouraging data for improved crop potential in both the US and EU added to the market negativity. US winter wheat condition gained two points to 31% now rated 'good/excellent' and US corn planting reached 81% completion - up 16 points on the week, which is six points ahead of the five-year average.

In Europe, the EU crop monitor, MARS, raised its EU soft wheat yield estimate from 5.96 tonnes per hectare to 6.01 tonnes per hectare, following a spell of favourable weather. This increase adds approximately one million tonnes to the overall EU production estimate, bringing the latest forecast to approximately 131 million tonnes - up six million tonnes on the year. French wheat crop ratings remain at a record high for this time of the year - 93% rated 'good / excellent' which compares to 73% last year. Paris wheat futures dropped to a 19-month low.

• Questions over Black Sea deal

Operations in the Ukrainian port of Pivdennyi reportedly came to a halt this week due to Russia blocking the entrance of ships. With 1.5 million tonnes of agricultural goods waiting to be loaded at the port, traders became concerned that this action was preventing the extension of the Black Sea export deal from operating and took some cover. This offered wheat futures markets some element of support.

A strong set of weekly EU wheat exports was also encouraging - up a notable 827,000 tonnes on the week, taking the total amount shipped this season (up until 21^st May) to 28 million tonnes. With six weeks of the season remaining, realising estimates for a total of 30 million tonnes looks more likely even though year end stocks could be up four million tonnes on the year.

Helping the flow in rare trade, US millers are thought to have bought over 200,000 tonnes of wheat from Poland and Germany. North African countries, Morocco and Algeria, have been the primary EU wheat buyers so far this season, taking 4.5 million tonnes and 3.9 million tonnes respectively despite strong Black Sea competition. MARS highlighted that there will be a need for North African countries to import a greater amount of wheat next season due to extensive dryness. In its first forecast for 2023-24, the United States Department of Agriculture (USDA) suggested a record wheat import need of 31.7 million tonnes - 2.3 million tonnes up on the year. However, this might prove too modest.

• Rains for Argentina

BARLEY

• Flat week for old crop feed barley prices

Old crop feed barley values have traded in a much narrower range compared with recent weeks, which reflected a relatively quiet week in global grain markets. There has been demand domestically from trade buyers to the ports, as well as some spot compounder demand in the North and South West of England. This has allowed for some two-way trade, with farmer selling also picking up now that the uncertainty over the Black Sea export corridor has been resolved, at least until the middle of July.

• Some domestic trade but export demand remains absent

New crop feed barley has also seen more two-way trade, with some domestic compounders taking cover given the significant drop in global grain markets since the turn of the new year. Spanish export demand is limited, even though barley crop estimates for Spain continue to fall due to the drought it has experienced so far in 2023. However, outside of Spain, European barley crops look to be in a good condition, with crops now benefitting from some sunlight. The latest update for the French barley crop has winter barley rated at 90% 'good/excellent' and spring barley at 95% 'good/excellent'. With UK crops also in good condition, it is forecast that the UK will have a large exportable surplus to market for crop 2023. As a result, we will need to remain competitive against other European origins.

• Malting barley market quiet

There is no demand for old crop malting barley, with buyers now covered up until harvest. With said harvest fast approaching, new crop remains very illiquid with values following the trend lower – just like other global grain markets.

OILSEED RAPE

Rapeseed markets closed £10/t higher this week, following a string of lower weekly closes fuelled by plentiful supply and relatively weak demand. However, this week's gains feel more like a respite rather than a reversal in market direction, as fundamentally very little has changed for the rapeseed market. If anything, conditions for developing crops around the world have improved. There are many estimates for over 21 million tonnes for the EU crop. Canadian and Australian plantings are also progressing well.

 PULSES

The old crop market has been quiet this week, with limited beans and peas coming off farm and a general lack of domestic demand. Currently, there is also a lack of trade for new crop pulses, which is likely due to the unclear demand picture. The outlook for new crop pulses is a 2% increase in planting area. This gain will come from beans, as total pea planted area is to due fall by 6% if estimates are accurate.

Favourable weather is forecast leading up to harvest for beans and the market is reflecting this with lower new crop prices. Peas look like they will continue to trade at similar levels. If the human consumption market returns, this will be supportive for pulse prices. How competitive UK pulses will be in the human consumption market will be influenced by Canada. With Canada having favourable weather conditions and large carry through stocks of over 15%, its pea supply is much higher. High demand from China and Bangladesh and a similar picture on beans means exports are expected to increase and create strong competition.

 FERTILISER

The new season fertiliser market opened this week – slightly later than last year, mainly due to the later spring. Gas prices have fallen as the demand has reduced, leading to a significant reset in prices from our suppliers. For advice on new season fertiliser, crop production planning and risk management, speak to your local Frontier contact.

Get in touch

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